There’s strength in mutual support Review of the year 2020 Including our Summary fnancial statement 2 Review of the year 2020 Welcome to our review of what we’ve achieved together over the last 12 months.
It covers the financial year from 5 April 2019 to 4 April 2020, and tells you all you need to know about your Society. Find out how we’ve stood together during the coronavirus pandemic, how we’re helping to look after your money at this difficult time and what we’ve done to make our members’ and employees’ lives a little easier. There’s also an update from our Chairman, David Roberts, and Chief Executive Officer, Joe Garner. Towards the back you’ll find a summary of all things financial (our ‘Summary financial statement’), a bit about how much we pay our Board of directors (the ‘Summary report of the directors on remuneration’), plus our remuneration policy. Thank you for being part of Nationwide. This year more than ever, your membership really does make a difference.
Chairman’s Chief Summary Statement Summary report letter Executive’s fnancial of the of the directors review statement auditors on remuneration Ipage 5 page 7 page 22 page 24 Ipage 25 3 What your Society has achieved this year
ards 201 Banking Aw 9 No.1 1st UK’s for customer most trusted Brand of the Which? B a r satisfaction amongst 2 n ea kin e Y 1 ~ g Brand of th our peer group fnancial brand Year 2019 • for the third year Helped more than I More than 16.3 million ••• 1 members ,,, 1 in 6 ~i•••i 1 in 6 @ frst-time buyers into current account 2019: 15.9 million a home of their own I switchers came to us3 2019: 1 in 5 2019: 1 in 5 £469 million £715 million We will help members underlying proft member fnancial stay in 2019: £788 million beneft, from incentives and better pricing than their homes £466 million the market average where they are in fnancial statutory proft 4 2019: £705 million diffculty caused by Covid-19 2019: £833 million
1 Lead at March 2020: 5.4%pts, March 2019: 4.8%pts. © Ipsos MORI 2020, Financial Research Survey (FRS), 12 months ending 31 March 2020 and 12 months ending 31 March 2019. c.51,000 adults (aged 16+) surveyed across Great Britain from a total representative sample of c.60,000 adults (aged 16+) per annum. Interviews were conducted face to face and online, and weighted to refect the overall profle of the adult population. Proportion of extremely/very satisfed customers minus proportion of extremely/very/fairly dissatisfed customers summed across main current account, mortgage and savings. Peer group defned as providers with main current account market share >4% as of April 2019 (Barclays, Halifax, HSBC, Lloyds Bank, NatWest, Santander and TSB). 2 Nationwide Brand Guidance Study compiled by an independent research agency, based on customer and non-customer responses for the 12 months ending March 2020. Financial brands included Nationwide, Barclays, Co-operative Bank, First Direct, Halifax, HSBC, Lloyds Bank, NatWest, TSB and Santander. 3 Pay.UK monthly CASS data. 12 months to March 2020: 17.2%; 12 months to March 2019: 21.5%. 4 Nationwide has committed not to repossess any homes over the next 12 months. 4 Review of the year 2020 How’s your Society performing?
We measure our performance on the things that matter most to our members: great service, long-term value and fnancial strength. We seek to strike the right balance between retaining suffcient proft to maintain our fnancial strength, delivering value to our members now, and investing so we can continue to meet the needs and expectations of members in the future. We are yet to understand fully the impact of Covid-19 on the coming year’s targets. However, our priorities remain to provide a safe and secure home for our members’ money and to deliver legendary service to our members. We’ve also committed to giving at least 1% of our pre-tax profts to charitable activities (2020: £9.5 million; 2019: £10.6 million)5. Service Value Strength Giving our members the Helping more members achieve their fnancial goals Keeping our members’ best service possible and providing them with better value products money safe and secure We aim to be the best for We also want to be We’re aiming to have 10 million We aim to share at least We aim to have a UK customer satisfaction in our among the top fve engaged members by 2022, £400 million of value with our leverage ratio (a measure peer group, with a lead organisations in the UK for with 4 million committed members each year through of our fnancial strength) of at least 4%pts. customer satisfaction. members who use at least incentives and better pricing of at least 4.5%. two of our products.8 than the market average.
TOP 1st 4 ,,••,• £
Lead: 9.4m 3.6m 7 • 6 •th Engaged Committed 5.4%pts 4 members members £715m 4.7% 2019: 4.8%pts 2019: Joint 5th 2019: 9.2m 2019: 3.4m 2019: £705m 2019: 4.9%
5 The 1% is calculated based on average pre-tax profts over the previous three years. Of the £9.5 million, £2.4 million was committed to Nationwide Foundation and £7.1 million to other social investment activities, which includes multiple programmes as well as internal costs of managing this investment. 6 © Ipsos MORI 2020, Financial Research Survey (FRS), 12 months ending 31 March 2020 and 12 months ending 31 March 2019. c.51,000 adults (aged 16+) surveyed across Great Britain from a total representative sample of c.60,000 adults (aged 16+) per annum. Interviews were conducted face to face and online, and weighted to refect the overall profle of the adult population. Proportion of extremely/very satisfed customers minus proportion of extremely/very/fairly dissatisfed customers summed across main current account, mortgage and savings. Peer group defned as providers with main current account market share >4% as of April 2019 (Barclays, Halifax, HSBC, Lloyds Bank, NatWest, Santander and TSB). 7 Institute of Customer Service UK Customer Satisfaction Index (UKCSI) as at January in each year. 8 Engaged members have their main personal current account with us; a mortgage of at least £5,000; or a savings account of at least £1,000. Committed members have an engaged membership product plus at least one other product. 5
In these challenging times, we are reminded of the human ties that ultimately bind us all. As we emerge from the crisis, I hope this spirit of mutual kindness and consideration will continue to support the many individuals, families and communities for whom life after the coronavirus A will undoubtedly be very challenging. The coronavirus emerged in the UK towards the end of our 2019/20 fnancial year. As it impacted letter our results and how we think about the future, I would like to share the Board’s perspective on from David Roberts all the Society achieved last year and our priorities Your Society’s Chairman for next year. The Board is responsible for the long-term sustainability of the Society, our culture and Dear member, values, and for governance. The strategic plan we put in place three years ago affrmed our strong At the time of writing in May 2020, the coronavirus has upended lives belief in mutuality, reinforced our desire to put and communities, causing widespread damage to the health, wellbeing the interests of members at the heart of our and livelihoods of our fellow citizens. decision making, and outlined how the Society would evolve in our fast-changing world. We have responded with a range of measures to help our 16 million Our strategy put us on a growth path – we have members through this difcult period. By the end of April, we had more members, higher mortgage balances and supported over 280,000 borrowers with payment holidays and interest higher retail deposits. Being member-owned, and having built signifcant capital strength in recent free periods on overdrafts and we have put in place a support package years, we have been able to forgo higher levels of to help them keep their homes if they are in fnancial difculty. Our proft so that we could continue to deliver great colleagues have responded fabulously, maintaining an essential service service and value to our members, while investing in difcult circumstances. Our members have helped us protect in our future and communities. We are proud of stretched resources by only contacting us for essential business and what we have achieved. using our digital services more. I would like to thank everyone for their However, the outlook for the UK has changed radically since 2016. Bank base rate has fallen to a amazing eforts. historic low, the UK has left the EU, and we face profound economic challenges from the coronavirus. 6 Review of the year 2020
Chairman’s letter continued Maintaining fnancial strength Governance and oversight contributions will go into our market-leading defned contribution scheme. In our 2019/20 fnancial results, lower profts The Board continues to maintain its strong refected active choices to deliver more value to governance and oversight of the Society, Board changes members, and to invest in the long-term future considering the impact of our decisions on all our With a mix of established and newer directors, of the Society, as well as the costs of settling stakeholders and engaging with our members our Board provides both continuity and challenge legacy PPI claims, and £101 million of provisions through TalkBacks and Member Connect. to the Society. In the last year, Lynne Peacock retired as Senior Independent Director and was for expected credit losses associated with the As a result of the ongoing outbreak of Covid-19, succeeded by Kevin Parry, a director since 2016. impacts of the coronavirus. Given the current physical attendance in person will not be possible economic environment, the Board has adjusted Mitchell Lenson retired as non-executive director, at this year’s AGM on 16 July. We nonetheless and Tony Prestedge resigned as deputy CEO to its priorities for the Society over the next year. encourage members to participate by voting We will continue to focus on keeping our fnances take up a senior post elsewhere. Mark Rennison online or by post. For further details please refer strong and building operational resilience. retired as Chief Financial Offcer, and was to the Notice of AGM 2020 which will be published Our UK leverage ratio and our Common Equity succeeded by Chris Rhodes, an experienced on on 10 June 2020. Tier 1 ratio are comfortably above regulatory nationwide.co.uk accountant and an executive director since 2009. requirements. As the interest rates on mortgages Pay policy I would like to thank them all for their commitment have fallen, we have had to take the painful We continued to balance pay restraint with our and wise counsel to the Society. We were pleased decision to reduce the interest we pay to our duty to attract people with the right expertise to welcome Phil Rivett, an experienced former savings members in order to protect our interest to run a major fnancial business. In these PwC partner specialising in fnancial services, as margin. In addition, the Board is clear we will challenging times our CEO, Joe Garner, voluntarily a non-executive director. Baroness Usha Prashar have to reduce our costs. These actions mean we took a 20% cut in combined base salary and will retire from the Board at the close of the AGM will be able to continue to provide competitive pension for 2020/21, and the non-executive but will continue to advise on our diversity and products, excellent service, and support our directors have volunteered to donate 20% of their community programmes. members through the diffcult times ahead. net fees from June to December this year to Shelter, Mutual support: a thriving membership to help vulnerable people impacted by Covid-19. and strong Society Protecting our culture and values We have also decided not to pay any executive We continue to be driven by our social purpose, performance-related variable pay for the 2019/20 We are in a period where we, our members to build society, nationwide, and are committed fnancial year. We continue to harmonise our and society more generally are facing signifcant to doing this in a responsible and sustainable pension arrangements. Pension contributions challenges, as we have done periodically way. We established a Responsible Business for executive directors are being brought into throughout our 136-year history. We face them Committee last year. We took further steps to line with those available to the remainder of our from a position of strength: with record reduce our environmental impact and also made people. We have decided to close our fnal salary membership, strong fnances and a talented available a £1 billion loan fund for discounted pension scheme to new contributions on 31 March and committed workforce. Thank you for your mortgages and additional borrowing for new 2021, given the increasing costs and risks of continued support for our Society. energy effcient properties and green home maintaining the scheme. Scheme members will David Roberts improvements. retain benefts built up to date, and future Chairman 7
The pandemic has shown how dependent we are on each other, and how important it is that we work together. As a mutual, Nationwide is founded on the belief that we can achieve more by acting together than we can alone, and this principle is guiding our response to the pandemic. We are helping members in fnancial diffculty A with interest-free periods for overdrafts, payment holidays on mortgages and loans, and a promise that no mortgage member will lose review their home over the next 12 months as a result of the coronavirus. We’ve taken steps to protect from Joe Garner our employees’ physical and mental health Your Society’s Chief Executive so we can maintain essential services to our members, and we’ve promised that everyone’s job is safe in 2020. We are paying our suppliers early, especially smaller ones, to help them stay in business. We’ve also increased our support Dear member, for charitable partners, like Shelter, to help protect their vital services during the pandemic. The last month of our fnancial year was overshadowed by the We believe that the character of any organisation comes very much to the fore in times like these, coronavirus. We have prioritised protecting the health and and we have been making our decisions very wellbeing of our colleagues from this terrible disease, supporting much with this in mind. those members in fnancial difculty, and maintaining essential The impacts of the pandemic will be felt over services. I would like to thank our employees who have gone to an extended period, but we face into this extraordinary lengths to serve our members through this time. scenario from a position of considerable strength. Since we implemented our building society, nationwide strategy over three years ago, the Society has grown signifcantly: we have attracted 1 million new members, an additional £15 billion in retail deposits and £18 billion in mortgage balances since 4 April 2017. 8 Review of the year 2020
Chief Executive’s review continued We achieved a great deal in 2019/20, and met or In addition, we have recognised costs associated As the full impact of the coronavirus on our are on track to meet the key targets for service, with halting our plans to launch a small business business becomes clearer, some of the targets value and strength that we set ourselves. account, for which the business case is no longer we set ourselves may not be achieved in the viable (see Q&A below). Financially strong short term. In particular, exceptionally low interest rates mean we are unlikely to meet our Building legendary service Keeping our members’ money safe and secure member fnancial beneft target in the next has always been our priority. That means making We met both of our service key performance fnancial year. With bank base rate at 0.1%, sure we are fnancially strong enough to weather indicators (KPIs), ranking 4th in the all-sector paying savings rates signifcantly higher than challenging economic times, such as that caused UK Customer Satisfaction Index9, and being this would not be fnancially sustainable, by the coronavirus pandemic. A key measure of no. 1 for customer satisfaction among our peer nor in the long-term interests of our members our fnancial strength is our UK leverage ratio, group10. In 2019, we were proud to be named or the Society. and this has exceeded our target in each of the Which? Banking Brand of the Year for the third Strength in mutual support last three years. We have also built our Common year running. Equity Tier 1 capital ratio to 31.9%, materially higher than required by regulation. Today, we, like our members, face the challenges Delivering value to members and communities of dealing with the social and economic impacts The coronavirus affected the last few weeks of a of the coronavirus. year in which we made active choices to deliver Members benefted from £715 million (2019: more value to members through competitive £705 million) in member fnancial beneft, much In our 136-year history, we have supported pricing and to invest for the long term. Underlying higher than our target of at least £400 million. our members and communities through many proft for the year of £469 million (2019: Committed members – those who have more crises and challenges. Looking ahead, we will £788 million) refected these choices, as well as than one product with us – grew to almost continue to manage our Society in our members’ provisions for legacy PPI claims in the frst half of 3.6 million in the last year and we are on track short- and long-term interests, which means the year. In the last few weeks of the year, it also to meet our 2022 target of 4 million. We awarded we will focus on maintaining our fnancial became clear that the coronavirus would have £9.5 million to charitable activities in our strength, managing our business sustainably, and a signifcant fnancial impact. We have made an communities, including £5.5 million in grants prioritising the needs of our current members, additional provision for credit losses which are to support charitable housing projects chosen as we have always done. expected to rise as a result of the deteriorating by our members. We have also made a £1 billion economic conditions, and net interest income loan fund available help make Britain’s Joe Garner has fallen as a result of the bank base rate cuts. homes greener. Chief Executive Offcer 9 Institute of Customer Service UK Customer Satisfaction Index (UKCSI) as at January 2020. 10 Lead at March 2020: 5.4%pts, March 2019: 4.8%pts. © Ipsos MORI 2020, Financial Research Survey (FRS), 12 months ending 31 March 2020 and 12 months ending 31 March 2019. c.51,000 adults (aged 16+) surveyed across Great Britain from a total representative sample of c.60,000 adults (aged 16+) per annum. Interviews were conducted face to face and online, and weighted to refect the overall profle of the adult population. Proportion of extremely/very satisfed customers minus proportion of extremely/very/fairly dissatisfed customers summed across main current account, mortgage and savings. Peer group defned as providers with main current account market share >4% as of April 2019 (Barclays, Halifax, HSBC, Lloyds Bank, NatWest, Santander and TSB). 9 Your questions answered
We regularly hear from members at our live TalkBack events and through our online forum, Member Connect. Here are some of the questions our members ask us.
Q Why are you no longer planning Q Why have you changed the way you to offer a business account? charge for overdrafts? A The medium-term interest rate outlook for the UK has fundamentally A We were the frst provider to respond to the FCA’s high cost of changed, with rates forecast to be even lower, for even longer. credit review, introducing a simple rate of interest for arranged Entering the business banking market is therefore no longer overdraft borrowing and removing all unarranged overdraft fees. commercially viable. We have returned the £50 million grant Along with new text alerts this gives our members greater from the Banking Competition Remedies Fund and redeployed transparency on costs and control over their borrowing. To help colleagues involved in the launch to other roles. This was a diffcult members through the pandemic, we halved the overdraft interest decision for us, but the right one, and will allow us to focus on rate for all members for three months, and offered a three-month supporting our current members and colleagues through the interest-free overdraft period to those struggling fnancially. immediate and longer-term impact of the pandemic.
Q When will you increase savings rates? Q How are you keeping your members A We are acutely aware of how diffcult the last decade has been for safe from scams? savers. As a member-owned Society, our aim has always been to A Helping members keep their money safe from fraudsters is always give members the best value we can afford. By keeping average a priority. We use the latest technology to monitor and protect deposit rates higher than the market average, members benefted members from fraud 24/7. Our staff are all trained to be vigilant from an extra £505 million in deposit interest last year. However, against fraud and in fact staff in branches prevented at least we will always be limited by prevailing interest rates, which £3.6 million in fraud against members last year. Awareness and reached a new low after the Bank of England cut its base rate in vigilance by our members are also important. Information on mobile response to the coronavirus. We continue to look for ways to make and digital banking fraud, fraud scams, card fraud and identity fraud saving rewarding to our members by, for example, offering special is on our website, and regularly updated as new types of fraud are rates for members, or including prize draws on certain accounts uncovered, for example, during the coronavirus disruption. We also to encourage regular saving. run fraud awareness sessions for members at our Member TalkBacks. 10 Review of the year 2020 Supporting the change for greener homes
Government, housebuilders and lenders need to work together to create meaningful incentives for greener homes.
Why this is important • Investing in FinTech partner, Switchd We have reduced our carbon footprint whose app can automatically switch a user’s UK homes account for 15%11 of the UK’s carbon energy supplier to ensure they are always on • Improvements in sustainability including emissions. We believe incentives for consumers to the best deal, including greener tariffs, and zero waste to landfll, biennial Carbon Trust change behaviours, affordably, are the only realistic produce a home report that will recommend Triple Standard accreditation and 100% way to help people make their homes greener. energy-effcient improvements. renewable electricity We are taking action to support members We are appealing to government for • Carbon neutral from April 2020 for all energy use, emissions for internal operations and • £1 billion made available in lending to • An independent review of Council Tax company vehicles, by offsetting residual carbon incentivise a carbon reduction in Britain’s to explore how linking taxation to a home’s homes by launching a new range of green • Employee green fund to help colleagues energy effciency could incentivise green home implement green initiatives across mortgages with preferential rates for improvements. members buying EPC A-rated homes, and Nationwide sites. offering preferential rates for green home improvements • Building low-carbon homes: the Oakfeld housing development funded by Nationwide is aiming to build 239 EPC A-rated homes A • Member of the Green Finance Institute’s B Coalition for the Energy Effciency of C Buildings: creating a market for net-zero carbon buildings, by accelerating capital fows D to retroft existing residential buildings E F G
11 Offce for National Statistics – February 2020. 11
~ Nationwide Y~ Foundation
Having a place to call home enables people to settle down, build their lives and make the most of their opportunities. A safe, secure home also helps people to cope with and overcome physical and mental health problems. Yet these positive impacts can’t happen when the cost of homes forces people into poverty and when living conditions are inadequate and poor quality. We give 0.25% of our pre-tax profts to The Nationwide Foundation, a charity that aims to increase the availability of decent, affordable homes for people in housing need. The Nationwide Foundation seeks to change the way decision-makers tackle the housing problems we face as a country. It does this by funding charitable causes around the UK that support and test housing solutions, as well as using its own voice to infuence for a better future. Find out more about the work that the Foundation supports at nationwidefoundation.org.uk. The Foundation’s trustees welcome questions via email to [email protected] or you can call them on 01793 652002. The answers to any questions will be published at the end of July on the Foundation’s website. Registered charity number 1065552.
,. - l~ .~ I • ...i 12 Review of the year 2020 Building thriving membership Doing more for our members
We’re here to help our members save, buy homes and manage their money.
Over the last three years, we’ve grown by: Making the UK greener is important to us too. That’s why we’ve made up to £1 billion available for 1 million 15 billion 18 billion preferential rate mortgages and additional borrowing members deposits£ mortgage£ balances for green homes and home improvements.
Mortgages We’re standing by our members through the diffculties created Our core purpose is to help members into by the coronavirus by putting measures in place like payment homes of their own. Last year, we lent holidays and a commitment to keep mortgage members in their £30.9 billion (2019: £36.4 billion) homes over the next 12 months. to our members, making sure we did it in a responsible way. We also helped 1 in 6 buyers (2019: 1 in 5) into their very frst home.
We’re the frst high street lender to offer a full range of later life mortgages, meaning our retired members can release equity from their homes or have an interest- only mortgage. 13
Current accounts Savings Our members opened 759,000 (2019: 794,000) new current accounts We look after almost £1 of every £10 saved in the UK. last year, taking us to our target of achieving a 10% share of all We think it’s really important to have a little put aside, so we’re current accounts.13 trying to get Britain saving. • Our Start to Save account includes a prize draw for regular savers. 759,000 • Our Pay Day = Save Day campaign new current accounts encourages people to save the day they’re paid. We’re representing a younger audience • Our ISA prize draws encourage 14 people to top up by at least £100. too, with 16% (2019: 14%) of Youth and Student Accounts being held with Nationwide. % As a building society, we seek to maintain our financial strength whilst 16 providing value to our members through pricing, propositions and service. Last year, members benefited from an extra £505 million in deposit interest Just for our members compared with the market average12. We’ve simplified our savings range, We keep our credit cards and personal introduced online-only- accounts and brought in an extra £5.7 billion (2019: loans just for you, our members. £6.0 billion) in deposits. That means we can offer you our best value products. Last year we grew our personal lending to £3.0 billion (2019: £2.4 billion) and we increased the volume of active credit card users.
5.7 Business current accounts £billion In April, we halted our planned business banking launch, as the business Total amount case is no longer viable in light of the low rate outlook and uncertain of extra deposits economic environment. Our priority will be to support current members through the uncertain times ahead.
12 We use member fnancial beneft to measure the additional fnancial value from the highly 13 CACI (February 2020). competitive mortgage, savings and banking products that we offer compared to the market. 14 CACI (February 2020) and internal calculations. 14 Review of the year 2020 Built to last Managing our members’ money wisely
Our members trust us with their money. So it’s our number one priority to keep it safe.
The last three years have been challenging, with intense competition and persistently low interest rates. And with recent interest rate cuts due to coronavirus, we need to make plans for more diffcult times to make sure we’re always here to support our members.
Last year, we grew our mortgages, current accounts and savings overall, We’ll always aim to make the but at a more moderate pace as we focused on broadening relationships right level of proft to maintain with our members. Our member fnancial beneft reached £715 million our fnancial strength and (2019: £705 million), as we chose to deliver as much value to members invest for the future, while as we could afford. delivering the best value we can to our members through better rates and offerings. £715million 15
Our underlying proft was lower We continued to build systems to support this year at £469 million our growing membership and higher (compared to £788 million in 2019). transaction volumes, and to deliver better That’s down to: security for our members. • investing in new technology We continued to invest in our digital services and systems and platforms that members will want and • continuing to offer competitively need in the future. priced products to members We also reviewed what new technology • legacy PPI claims means for our existing assets, leading to • the economic impact of impairments and write-offs of £124 million coronavirus. (2019: £115 million).
Our total costs for this year were 3% higher, due to: We measure the strength of our fnances using our UK leverage • increase in our investment spend ratio, which compares how much capital we have compared to the assets on our balance sheet. It’s what makes sure we • costs associated with our business banking proposition can withstand economic shocks, like that caused by coronavirus, • partly offset by a one-off gain from the decision to close and we’re pleased to say it’s at 4.7% (2019: 4.9%). our fnal salary pension scheme. That’s above both regulatory requirements of 3.6% and the target of 4.5% we set ourselves. Over several years we have also built our Common Equity Tier 1 capital ratio to 31.9% (2019: 32.2%15), £2,312 £2,254 which is higher than the million million regulatory requirements. 2020 2019
15 The fgure for 2019 has been restated (previously reported as 32.4%). 16 Review of the year 2020 Building legendary service Giving our members the best possible service
We always aim to give our members the best service possible, whether that’s in person, online or through our Banking app.
The way our members use branches is changing and we’ve Named seen a signifcant increase in mobile and digital interactions. Which? But whether our members bank with us in person, using the app Banking or over the phone, we want to make it as easy and seamless Brand as possible to switch between them all. of the Year 2019
ards 201 For three years running, we’ve been Aw 9 named Banking Brand of the Year by Which? And this year we were ranked 4th in the UK Customer Which? B a r Satisfaction Index for all sectors, n ea 16 kin e Y not just banking . g Brand of th
16 Institute of Customer Service UK Customer Satisfaction Index (UKCSI) as at January 2020. 17
Our branches The role of our branches is evolving, and Our technology we’re committed to maintaining a strong We have 3.3 million mobile-active members using our Banking app, branch network to support our members that’s up almost 7%, including almost half of current account and communities around the country. members (2019: 41%) who typically use our app 26 times a month. Over the last three years, we’ve upgraded With our app, members can now: 200 branches to our new design. This year, • register instantly we’re also trying out new branch formats. In Lichfeld and Sheffeld, we’re testing a • get auto-alerts on better savings fully-staffed, tech-enabled, counter-free rates and overdraft information branch. And in small towns like • report lost and stolen cards Billingshurst, we’re testing community • set up new payees ‘pop-up’ branches. • freeze and unfreeze cards • see pending transactions.
Our branches and colleagues help protect our members from fraud, including romance, safe We’ve also achieved record satisfaction scores of account and advance fee scams, which could 4.8/5 on Apple iOS and 4.6/5 on Android. otherwise cost a member their life’s savings.
Our specialist support team is here to help members who are fnding things diffcult. The help available 4.8/5 4.6/5 depends on our members’ circumstances, but we Apple iOS satisfaction score Android satisfaction score can offer things like mortgage payment holidays or penalty-free access to fxed term savings accounts. The investment we’ve made in building capacity and resilience in our systems means we’ve been able to handle growing transaction volumes. These reached 1.6 billion last year, up by 22% compared to the previous year. We also had the capacity to cope with demand peaks, like on Black Friday in November 2019, when we handled over 7 million transactions – that’s 60% higher than a typical day. 18 Review of the year 2020 Building PRIDE Helping our people achieve great things together When our people believe in what they do, feel valued and can grow % their own careers, that’s when they best serve our members. 77 Employee engagement PRIDE is the set of Putting our members and their money frst values and principles Rising to the challenge Employees we ask our employees Inspiring trust Our employee engagement score is 77% (2019: 78%), to live by. It’s all about Doing the right thing in the right way which is just below the high-performing benchmark. Our people how we treat our have described us as honest, ethical and trustworthy. members and each Excelling at relationships other.
■pride Our people can develop their own careers with a new online learning platform, career placements and project leadership. Reward We have a defned beneft pension scheme (for employees who joined us before 2007), and a defned contribution pension scheme (for those joining since 2007). After discussions with our staff union and affected employees, the Board decided to close the defned beneft scheme to future accrual on 31 March 2021 due to increasing costs and risks of maintaining it. Scheme members will keep their accumulated benefts and build up future benefts in our defned contribution scheme, which offers employer contributions of up to 16% based on an employee contribution of 7% of salary. Our Sharing in Success reward scheme continues to recognise every employee’s contribution to our collective performance, focusing especially on the things that matter most to members. 19
Inclusion and diversity Wellbeing We want to build an inclusive culture where everyone can be themselves We’re investing in wellbeing, including working and thrive, and for our Society to refect the diversity of the wider with Mind and Public Health England’s Every communities we serve. Mind Matters campaign. We’re tackling imbalances in our workforce, particularly at more senior We’re looking after our people’s wellbeing levels, through a new inclusion and diversity agenda headed by our Chief during coronavirus too, by enabling them to Operating Offcer. work at home, supporting them remotely and We’ve set new diversity aspirations for 2028, which will be tracked and enforcing social distancing at all our sites. reported to our leadership team and Board. And we’ve improved our family friendly policies, including enhancing parental leave and changing our premature baby policy to give extra Gender and ethnicity pay gap support to parents. Our 2019 gender pay gap was 28%, broadly the same as in previous years. We’ve introduced a new sponsorship programme to help women and We voluntarily published our ethnicity employees from a black, Asian or ethnic minority background overcome pay gap for the frst time, which was 17%. unseen barriers to progression. In both cases, the gap refects the fact We’re also working with the British Disability Forum, along with our that we have more women and ethnic own disability network, to fnd new ways to empower and engage minority employees in junior roles than we disabled colleagues. do in senior roles. We’re working hard We’ve improved our recruitment process and reduced the ‘masculine’ to address these imbalances and help all language we use. This has already led to more applications from women our employees achieve their full potential. in male-dominated roles. Gender pay is not the same as equal pay and our regular audits show that our pay policies operate fairly. Equal pay measures the pay of men And our employee networks and women who are carrying out the same or equivalent roles. play a valuable part in our work, helping us develop and launch initiatives such as our Carers’ We’ve launched a technology recruitment Passports which help us support campaign externally, and a tech talent employees in balancing caring development programme internally, with responsibilities with working life. new offces in London and Swindon for our Other activities by our networks tech specialists. include participating in Pride parades across the UK. 20 Review of the year 2020 Building a national treasure Striving to serve our communities
We want to be a force for good in society, investing in all our futures. And we want to ensure the beneft is mutual.
We donate 1% of our pre-tax profts to good causes. It’s split In Swindon, we’re funding a new, not-for-proft sustainable housing development. between our own social investment programme and the Nationwide We hope others can use this as a blueprint to fnd solutions to the housing crisis. Foundation, an independent charity that we set up and fund. This year, the total funding was £9.5 million (2019: £10.6 million).
~ Nationwide akfield. ..~ Foundation
We’ve been campaigning for better rental standards too. Our infuence has helped end no-fault evictions and widened access to the rogue landlords’ database. We also sponsor the Action on Empty Homes campaign to bring 226,000 empty homes back into use. We’ve been named the UK’s billion most trusted fnancial brand.17 This year, we’ve made £1 billion available £1 in preferential rate mortgages and additional borrowing for green homes and improvements.
17 Nationwide Brand Guidance Study compiled by an independent research agency, based on customer and non-customer responses for the 12 months ending March 2020. Financial brands included Nationwide, Barclays, Co-operative Bank, First Direct, Halifax, HSBC, Lloyds Bank, NatWest, TSB and Santander. 21
We also changed the rules around the grants when coronavirus Everyone hit. Instead of using the grants for the specifc reason they’d applied for, we allowed the charities to use it for whatever they felt most deserves a appropriate during this really diffcult time. place ft to call home Robin is one of our Community Board members in Cambridge.
Having a home is so important. It gives you a real sense of security. The work we’re doing and the grants we’re giving are so valuable. We’re supporting projects right here in our local community, so we can see exactly who we’re helping and the difference we’re making.
Three years ago, we decided to focus our social investment primarily on housing. •• A big part of that is our Community Grants programme. That’s where members and colleagues come together to award grants to local housing projects across the country. This year alone, they’ve awarded £5.5 million (2019: £4.2 million).
£5.5million 22 Review of the year 2020 Summary fnancial statement
For the year ended 4 April 2020 Results for the year 2020 2019 This fnancial statement is a summary of information £m £m in the audited annual accounts, the directors’ report Net interest income 2,810 2,915 and annual business statement, all of which will be Other income and charges 236 255 available to members and depositors free of charge on (Losses)/gains from derivatives and hedge accounting (7) 36 demand at every offce of Nationwide Building Society Administrative expenses (2,312) (2,254) from 10 June 2020. They will also be available on the Impairment losses and other provisions (261) (119) internet at nationwide.co.uk. The auditor’s report Proft for the year before taxation 466 833 in relation to the full fnancial statements was not Taxation (note i) (101) (197) qualifed in any respect. Proft for the year 365 636 Reconciliation of statutory proft to underlying proft Summary directors’ report 2020 2019 The Summary directors’ report comprises £m £m ‘What your Society has achieved this year’ Statutory proft for the year before taxation 466 833 on page 3, ‘How’s your Society performing?’ FSCS (note ii) (4) (9) on page 4, the Chairman’s letter on pages Losses/(gains) from derivatives and hedge accounting (note iii) 7 (36) 5 and 6, and the Chief Executive’s review on Underlying proft for the year before taxation 469 788 pages 7 to 10 and 12 to 21. Notes: i. Comparatives have been restated to present tax consequences of distributions on Additional Tier 1 instruments in the income statement rather than directly in reserves. Approved by the board of directors on 28 May 2020 ii. FSCS credits, which are excluded from statutory proft, are from FSCS recoveries related to failures provided and signed on its behalf by: for in previous years. Ongoing FSCS management expenses are included within underlying proft. iii. Although we only use derivatives to manage risks, their impact can be volatile. This volatility is largely due D L Roberts, Chair to accounting rules that do not fully refect the economic reality of our approach to hedging fnancial risks. J D Garner, Chief Executive Offcer The reconciliation above adjusts statutory proft before tax for specifc items to derive an C Rhodes, Chief Financial Offcer underlying proft before tax fgure. The purpose of this measure is to refect management’s view of the Group’s underlying performance and to assist with like for like comparisons of performance across periods. 23
Financial position at the end of the year Summary of the key fnancial ratios required by the Building Societies Act 2020 2019 Assets £m £m 2020 2019 Liquid assets 37,388 32,736 Gross capital as a percentage of shares 10.2% 9.4% Mortgages 188,587 185,806 and borrowings Other lending (note i) 12,391 13,245 This ratio helps us measure how much capital we have to protect our members and other Derivative fnancial instrument assets 4,771 3,562 creditors against shocks. Fixed and other assets 4,904 2,952 Total assets 248,041 238,301 Liquid assets as a percentage of shares 16.8% 15.2% and borrowings Members’ interests, equity and liabilities This ratio is a measure of our ability to meet normal cash demands, such as savings Shares (member deposits) 159,691 153,969 withdrawals or providing new mortgages. Borrowings 62,257 61,165 Derivative fnancial instrument liabilities 1,924 1,593 Proft for the year as a percentage 0.15% 0.27% of mean total assets (note iii) Other liabilities 1,637 1,449 This ratio measures the proft made Subordinated liabilities 9,317 6,706 in the year relative to the average amount Subscribed capital 253 250 of total assets. Core capital deferred shares 1,325 1,325 Management expenses as a percentage 0.95% 0.96% Other equity instruments 593 992 of mean total assets Reserves (note ii) 11,044 10,852 This ratio is a way of measuring how effcient Total members’ interests, equity and liabilities 248,041 238,301 we are being. Notes: We are required to disclose the above ratios under legislation originally i. Other lending includes consumer banking and commercial lending. drafted in 1986. Today, we use different measures for capital strength, ii. Reserves include a general reserve of £10,749 million (2019: £10,418 million). The remainder relates to a cash fow hedge reserve, revaluation reserve and other reserves. liquidity, proftability and effciency. These include our Common Equity iii. Comparatives have been restated to present tax consequences of distributions on Tier 1 capital ratio, UK leverage ratio and underlying proft. More information Additional Tier 1 instruments in the income statement rather than directly in reserves. on these measures is shown on page 15. 24 Review of the year 2020 Statement of the auditors
to the members and depositors of Nationwide Building Society. We have examined the Summary fnancial statement of Nationwide Building Society for the year ended 4 April 2020, which comprises the Results for the year, the Reconciliation of statutory proft to underlying proft, the Financial position at the end of the year, and the Summary of key fnancial ratios required by the Building Societies Act 1986 set out on pages 22 to 23, and the Summary report of the directors on remuneration on pages 25 to 35.
Respective responsibilities of Basis of opinion Use of our report directors and auditors Our examination involved agreeing the balances This statement is made solely to the members and The directors are responsible for preparing the disclosed in the Summary fnancial statement depositors of Nationwide Building Society, as a body, Summary fnancial statement, in accordance to the Annual Report and Accounts. Our audit in accordance with Section 76 of the Building with the Building Societies Act 1986, which report on the Society’s Annual Report and Societies Act 1986. Our audit work has been includes information extracted from the Annual Accounts and the auditable part of the Report undertaken so that we might state to the Society’s Report and Accounts and the auditable part of the directors on remuneration describes the members and depositors those matters we are required to state to them in an auditor’s statement of the Report of the directors on remuneration basis of our opinion on those fnancial statements and the auditable part of that report. and for no other purpose. To the fullest extent of Nationwide Building Society for the year permitted by law, we do not accept or assume ended 4 April 2020. Opinion responsibility to anyone other than the Society and the Society’s members and depositors as a body, Our responsibility is to report to you our opinion In our opinion the Summary fnancial statement for our audit work, for this statement, or for the on the consistency of the Summary fnancial is consistent with the Financial statements, opinions we have formed. statement with the Financial statements, the Directors’ report and the Report of the Directors’ report, and Report of the directors directors on remuneration of Nationwide on remuneration within the Annual Report Building Society within the Annual Report and Accounts, and its compliance with the and Accounts for the year ended 4 April 2020 Ernst & Young LLP relevant requirements of Section 76 of the and complies with the applicable requirements Registered Auditors Building Societies Act 1986 and the regulations of Section 76 of the Building Societies Act London made thereunder. 1986, and the regulations made thereunder. 28 May 2020 25 Summary report of the directors on remuneration
For the year ended 4 April 2020
This report is a summary of our full ‘Report of the directors on remuneration’, which you can fnd “H aving the same goals online at nationwide.co.uk within the ‘Results and accounts’ section. It includes our new helps ensure that all our forward-looking directors’ remuneration policy on which an advisory vote will be sought at the people work together.” 2020 AGM, along with details of the directors’ pay for the year to 4 April 2020 and what they can earn in the coming year.
Dear fellow member, The onset of Covid-19 has presented a unique 2019/20. Taking into account this request, set of challenges for the Committee. Although I am pleased to present my frst Remuneration together with the impact of the pandemic on Committee report since taking on the role of the virus emerged in the UK towards the end member saving rates, the Committee Committee Chair in September 2019. I would of our 2019/20 fnancial year, it has signifcantly determined that no performance pay awards like to personally thank Lynne Peacock for her impacted our 2019/20 results and meant that would be made for this population and that contribution as the previous Committee Chair. we must think differently about the year ahead. a fat variable pay award of £1,200 should be This report includes details of our directors’ The diffcult decisions we have already taken, given to all other employees. In March we also pay for the year to 4 April 2020, together with and may need to take in the future, continue agreed with the Prudential Regulatory Authority’s to be frmly guided by our social purpose – our new directors’ remuneration policy, on request for the Society not to pay any building society, nationwide. which member approval will be sought at the performance pay in cash to senior employees 2020 AGM. We have set out in our full ‘Report of the directors during 2020, including all Material Risk Takers. As set out by the Chairman, David Roberts, on remuneration’ how we performed against We believe it is important to provide certainty we are in unprecedented times as we witness the measures we set ourselves at the start the impact of the Covid-19 global pandemic. of the year under the Directors’ Performance for our people, and we have made a commitment This is an incredibly challenging time for people Award (DPA), our performance pay plan. The that we will not make any compulsory and businesses, including the Society. Our primary CEO and CFO and broader Nationwide Leadership redundancies for permanent employees in priority is the safety of our employees and Team asked the Remuneration Committee to 2020. However, in our current economic members, and we continue to put our members’ consider not awarding any performance pay circumstances, this will impact decisions both needs at the heart of our decision making. which they may have otherwise been due for for 2019/20 and looking ahead to next year. 26 Review of the year 2020
I would therefore like to thank Joe Garner, the be scaled back for 2020/21 across the Society. A single set of goals helps ensure all our people CEO, for voluntarily requesting that his combined Awards for executive directors for the coming work together and are focused to deliver base salary and pension be reduced by 20% for year will be set at around one-third of the sustainable success and good outcomes for 2020/21, a reduction of £227,560 from the normal performance pay opportunities, members. For our senior leaders, performance current position. We were the frst UK fnancial in line with the approach for all employees. pay also refects their individual contribution, services frm to announce such a reduction. These awards will continue to be aligned to where we measure not only what they have I also note that for 2019/20 Joe made a measures which are important to our members, delivered but also have an equal focus on their signifcant personal contribution to the cost of which for 2020/21 will be customer service conduct and behaviours. The Board will only his taxable benefts, which would otherwise satisfaction, committed members and total pay any performance related pay if it is sure have been borne by the Society. More details costs, and in determining any awards under the that the Society is fnancially secure. on Joe’s remuneration for 2020/21 are set out plan, the Committee will consider the overall in this report. Chris Rhodes, the CFO, has performance of the Society over the year and Performance payments for senior leaders are voluntarily reduced his pension allowance to our economic circumstances at that time. paid in instalments, over seven years in the 16% of salary from 2020/21 to align with the case of our executive directors. This way, if one Combining the change to base salary, pension of our leaders leaves the Society, then some of maximum beneft available to the wider and performance pay results in a very signifcant employee population. In addition, the non- the performance payments already awarded reduction in the CEO’s overall maximum pay may be forfeited. The Committee also has the executive directors have volunteered to donate opportunity for 2020/21, a reduction of over 20% of their net fees from June to December of discretion to cancel all, or part of, previously 40%. More details on our approach are set out awarded performance pay in the event of this year to Shelter, to help support vulnerable in this report. people impacted by Covid-19. We also decided misconduct or if the Society’s performance that there will be no general pay increases for Our core principles deteriorates signifcantly. A substantial directors or senior employees across the proportion therefore remains ‘money at risk’ Our heritage and our unique position as a Society in 2020/21, nor any increases for the which may be reduced or cancelled at the member-owned organisation means our Chairman and non-executive directors. Committee’s discretion, taking into account the approach to remuneration is aligned to the needs Society’s and the individual’s performance over As we look ahead to 2020/21, while we remain of our members and is designed to drive the the seven-year period. fnancially strong enough to weather challenging behaviours consistent with our wider purpose, economic times, our pay approach must echo values and strategy. Our remuneration We aim to be transparent with our members our responsibility to ensure the long-term framework for all employees is simple, comprising and voluntarily disclose details of our executive sustainability of the Society and protect our fxed pay and a single performance related pay pay arrangements, including as required under culture and values. Refecting the current plan with performance assessed based on the Corporate Governance Code where it is challenging environment, performance pay will three measures that apply for everyone. relevant for us to do so as a mutual. 27
Our policy meetings to provide valuable insight on the Mark Rennison’s leaving arrangements and the views of their members and to allow a two-way changes to Chris Rhodes’ package are set out Our remuneration policy was last approved by dialogue on broader employee pay matters. in the full report together with the details for members at the 2017 AGM, receiving strong In addition, in my capacity as director Tony Prestedge, who resigned as Deputy Chief support. We are committed to continue responsible for Voice of the Employee, this year Executive and Board member in March 2020. demonstrating best practice in corporate I hosted a podcast for the Society, providing All arrangements are in accordance with policy. governance and alignment with legislation on an opportunity to engage with colleagues executive pay which applies to listed companies, on remuneration. Member voting on remuneration so we are submitting our policy report to an advisory vote of our members this year. Taking all these factors into account, the A core principle of our approach is that members’ Committee concluded the current approach views and interests are considered when we During the year the Committee undertook a remains appropriate to continue delivering the design remuneration policies and determine pay detailed review of our approach to remuneration Society’s ambitions. I am therefore pleased to outcomes. There will therefore be two separate across the Society, including executive confrm that no material changes to the policy directors. The Committee engaged with and advisory votes from members on remuneration are proposed, other than a reduction in pension this year. The frst will be on our Policy report listened to the views of our key stakeholders, beneft for existing and new executive directors as well as refecting on feedback received from and the second vote will be the annual advisory to 16% of salary, aligning with the maximum members in previous years and the external vote on our Annual report on remuneration beneft available to the wider employee environment. outlining our approach during 2019/20 and how population, and a change to the operation of the Committee propose to implement the new The Committee also paid close attention to the our leaver provisions for the DPA to align with policy during 2020/21. relationship between pay policies and practices market practice. Our approach to scaling back for executive directors and other employees. performance pay opportunities for 2020/21 On behalf of the Remuneration Committee, We believe the principles and approach to pay has also been refected in the policy. I recommend that you endorse our Policy report should be consistent for everyone, including We would like to invite members to vote on our and Annual report on remuneration. the executive directors, and we have taken proposed policy. steps to address any key areas of difference, Mai Fyfeld Chair – Remuneration Committee for example on pensions. We also think it is Board changes vital the Committee understands the wider employee perspective when considering pay As previously announced, the former Chief decisions and therefore the Committee Financial Offcer, Mark Rennison stepped regularly invites the General Secretary of the down from the Board in September 2019 and Nationwide Group Staff Union to attend our Chris Rhodes was appointed to this role. 28 Review of the year 2020 Policy report
Overview of remuneration policy
The key elements of our directors’ remuneration policy are set out below and the full policy is available at nationwide.co.uk
Remuneration policy for executive directors – fxed pay Element Operation Opportunity Base salary Normally reviewed on an annual basis. Whilst there is no maximum, base salaries are set taking into account market data for similar roles in comparable organisations. Other factors considered include the individual’s skills, experience and performance and the approach being taken on salaries in the wider organisation.
Benefts May include a car allowance, access to drivers when required, Whilst there is no maximum value to the benefts healthcare and insurance benefts. provided, benefts are reviewed regularly to ensure they remain appropriate to role and location to assist individuals in carrying out their duties effectively.
Pension Executive directors receive a cash allowance in lieu of pension. Cash allowances are set as a percentage of base salary. The maximum pension allowance payable is set at a level in line with the wider employee population (currently 16% of base salary). This approach will apply to current executive directors from April 2020 (a reduction from the previous level of 24% of salary for the CEO and 20% for the CFO). 29
Remuneration policy for executive directors – variable pay Element Operation Opportunity Directors’ At the end of the one-year performance period an award is made The targets refected in the Society’s Plan need to Performance to refect achievement against performance measures. be achieved to generate a ‘target’ award against the Society measures, and considerably exceeded Award (DPA) No more than 40% of the total award is paid after the end of the to generate the maximum award. The overall Rewards achievement of performance period and at least 60% is deferred for between maximum opportunity including both elements stretching Society, team three and seven years in line with regulatory requirements. and individual targets for varies by role (see below). The actual amount a single financial year, with The gateway and Society performance measures selected for both awarded in respect of any year is subject to the payment spread over the elements of the DPA are set on an annual basis by the Committee. limit laid down by regulatory standards longer term. These will normally refect a mix of fnancial measures, measures Normal policy (for performance years other relating to the strategic performance of the Society as well as Comprises two elements: than 2020/21) (i) an all--employee element regulatory obligations. Individual performance (including conduct (ii) an element in which and behaviours) will also be assessed. The normal maximum variable pay opportunities the most senior leaders (i.e. including both elements) are: A minimum of 50% of both the upfront and deferred elements is participate subject to • 152% of base salary for the Chief Executive deferral provisions. delivered in or linked to the value of the Society’s core capital deferred shares (CCDS) and subject to a twelve-month retention period in • 112% of base salary for other executive directors line with regulatory requirements. Policy for 2020/21 The Remuneration Committee may reduce or cancel payments For awards made in respect of 2020/21, the under the DPA if it believes that the plan outcomes are not maximum variable pay opportunities (including representative of the overall performance of the Society. both elements) have been reduced to: • 51% of base salary for the Chief Executive • 37% of base salary for other executive directors In the event that the Society’s fnancial performance in 2020/21 materially exceeds expectations, the Committee retains the discretion to make an award above these levels (subject to the overall limits within this policy). 30 Review of the year 2020
Remuneration policy for non--executive directors Element Operation Opportunity Chairman and The Chairman’s fee is normally reviewed and approved by the Whilst there is no maximum level, fees are set non-executive Remuneration Committee on an annual basis. taking into account practice at other organisations director fees Non-executive director fees are normally reviewed and approved as well as the time commitment for the role at by the executive directors and the Chairman on an annual basis. Nationwide. Non-executive directors are paid a basic fee, with an additional supplement paid for additional roles or responsibilities, including in respect of the Senior Independent Director role or Voice of the Employee role, or for serving on or chairing a Board Committee. The Chairman and non-executive directors do not take part in any performance pay plans or in any pension arrangements. Benefts may be provided if considered appropriate.
What our executive directors could earn based on performance
The charts below illustrate the amounts that each of the executive directors would be paid under different performance scenarios under the policy, and specifcally for 2020/21 taking into account the changes for that year as explained on page 29.
J D Garner C S Rhodes
Maximum opportunity £2,605k Maximum opportunity £1,554k ■ Salary Maximum opportunity £1,458k Maximum opportunity £1,064k (2020/21) (2020/21) ■ Benefts Target opportunity £2,110k Target opportunity £1,332k ■ Pension Target opportunity £1,348k Target opportunity £1,011k (2020/21) (2020/21) ■ DPA Minimum opportunity £1,213k Minimum opportunity £822k Minimum opportunity Minimum opportunity (2020/21) £1,058k (2020/21) £822k 31
For the purposes of these charts, given the Recruitment policy nine months for any new executive directors. voluntary reduction in the CEO’s base salary and The terms set out in the service contracts for On the appointment of a new executive director, pension for 2020/21, in addition to the scale back the current executive directors do not provide the Committee will as far as possible determine of performance pay opportunities for 2020/21, the ongoing remuneration package in for any payments that are not in line with this two illustrations are provided for each scenario: accordance with the policy described in the policy. Service contracts include a provision for a termination payment in lieu of notice, • One refecting our normal ongoing policy, policy table above. It would aim not to pay more which will normally be subject to mitigation, showing base salary and pension contribution than necessary to secure the right candidate. up to a maximum of 12 months’ base salary. levels from 1 April 2020, prior to the voluntary As part of any new recruitment, the Committee reduction in the CEO’s base salary for 2020/21, would consider whether it was necessary to offer The Chairman and non-executive directors are and using normal maximum and target a higher maximum award level under our appointed for fxed terms not exceeding three performance pay opportunities under the performance pay plan in order to secure the years, which may be renewed subject to their policy as set out above; and desired candidate. Any such increase would re-election by members at AGMs. There are • One refecting the actual amounts our remain within the overall limit laid down by no obligations in the non-executive directors’ regulatory standards and would only be executive directors could earn in 2020/21, letters of appointment that could give rise to applicable for the period of twelve months taking into account the voluntary reduction remuneration payments or payments for loss of following appointment. in the CEO’s base salary and using scaled offce. The dates of appointment to the Board back maximum and target performance pay The Committee may also consider whether it is for the Chairman and non-executive directors opportunities for the year under the policy necessary to offer any one-off arrangements on are set out in the Governance report. as set out above. the recruitment of a new executive director to ‘buy out’ performance pay and any other Leaver provisions for executive directors The actual amount awarded in respect of any remuneration arrangements forfeited on leaving If an executive director leaves in ‘good leaver’ year would be subject to the limit laid down a previous employer and further information is circumstances (defned as redundancy, by regulatory standards, which is currently set set out in the full report. retirement, ill health, death or by mutual consent, such that variable remuneration does not e.g. for redundancy/succession planning Service contracts exceed 100% of fxed remuneration. purposes), they would, subject to approval In both scenarios, the value of benefts is based on Executive directors’ terms and conditions of by the Committee on an individual basis, the benefts paid in respect of 2019/20, as set out employment are detailed in their individual normally be offered a payment in lieu of notice in the single total fgure of remuneration table. contracts which include a notice period of covering 12 months’ base salary. Such a 12 months from the Society to the individual payment might also cover benefts and Further details of the assumptions taken in respect and a notice period of six months from the pension allowance. All such payments will of these charts are set out in our full policy. individual to the Society, which will increase to be subject to mitigation. 32 Review of the year 2020
Where an executive director leaves during the Other features of our policy Whilst there was no formal consultation, a copy performance year in good leaver circumstances of the policy was shared with the Nationwide they may, at the Committee’s discretion, receive a These are set out in detail in our full report. Group Staff Union in advance of publication. pro-rata performance award for the period of Those employees who are also members of the time served during the current performance Consideration of employment conditions Society will be able to vote on the Policy report elsewhere in the Society period. They may also be eligible to receive some and the Annual report on remuneration. or all of the deferred portion of any award, which The pay and conditions of all employees are taken Consideration of member views will typically be delivered on the normal timescale. into account when determining executive At recent AGMs we have received a signifcant Individuals who leave in other circumstances remuneration and the Committee appreciates the majority vote in favour of our remuneration (e.g. resignation) would receive only contractual importance of this relationship. The Committee is reports. We are also mindful of views expressed payments to which they are entitled and would always mindful of ensuring that the pay policy for by individual members regarding specifc not receive any payment in respect of performance senior roles is consistent with the culture and values aspects of the policy. When taking decisions on pay plans, unless the Remuneration Committee of the Society as a whole. Our policy is to offer remuneration policy, the Remuneration determines there is a due case for discretion. packages which are competitive with the fnancial Committee is also always conscious of the need Further details of our leaver provisions are set out in services market in which we operate and to reward to ensure executives are motivated and our full ‘Report of the directors on remuneration’. individuals for delivering value to members. rewarded to deliver value for our members.
Annual report on remuneration for 2019/20
Directors’ Performance Award (DPA) was achieved; however, the outcome for the of 2019/20, together with the impact of the statutory proft gateway resulted in the Covid-19 pandemic on member saving rates, A signifcant proportion of the overall remuneration for executive directors is dependent on the amounts payable under the plan being scaled the Committee decided to reduce the total performance achieved in the year against a back to around 16% of the award due based on value of performance pay outcomes to zero. number of key measures. Based on three Society and individual performance. Taking into Further details of the operation of the plan, measures under the plan for 2019/20 (customer account the request from the CEO and CFO not together with the targets set and performance satisfaction, committed members and sustainable to be considered for any performance pay achieved are included in the full ‘Report of the cost savings) broadly on-target performance which they may have been due in respect directors on remuneration’. 33
Where indicated, the tables in the Executive directors’ remuneration following sections have been audited.
These disclosures are included in compliance with the Building Societies Act 1986 and other mandatory reporting regulations, as well as the Large and Medium-Sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013, which the Society has voluntarily adopted. The table below shows the total remuneration for each executive director for the years ended 4 April 2020 and 4 April 2019. Single total fgure of remuneration for each executive director (Audited) Executive directors Fixed remuneration Fixed remuneration Variable remuneration Taxable benefts Total pay package Salary Pension allowance Directors’ Performance Travel and other taxable Award (note iii) benefts (note iv) £’000 £’000 £’000 £’000 £’000 2020 J D Garner 916 220 - 150 1,286 T P Prestedge (note i) 601 144 - 144 889 M M Rennison (note ii) 306 73 - 59 438 C S Rhodes 634 137 - 63 834 Total 2,457 574 - 416 3,447 2019 J D Garner 885 292 1,010 185 2,372 T P Prestedge 590 195 522 141 1,448 M M Rennison 635 210 511 141 1,497 C S Rhodes 590 195 499 67 1,351 Total 2,700 892 2,542 534 6,668
Notes: i. T P Prestedge resigned from the Board on 10 March 2020. ii. M M Rennison stepped down from the Board on 13 September 2019. Details of his departure terms are set out in the full ‘Report of the directors on remuneration’. iii. Variable remuneration consists of the awards under the DPA. A substantial proportion of any awards under this plan are subject to deferral with payments spread over the following seven years. iv. Our directors receive a number of benefts and, where appropriate, we pay tax associated with those benefts. In the single fgure table above, ‘taxable benefts’ includes certain essential travel costs met by the Society, including any tax due under HMRC regulations, provided to enable the executive directors to work whilst travelling and undertake their responsibilities most effectively. Other benefts include medical insurance, car allowance and security. This value is included as fxed remuneration for the calculation of the bonus cap in meeting our regulatory requirements. 34 Review of the year 2020 Non-executive directors’ remuneration
The total fees paid to each non-executive director are shown below.
Single total figure of remuneration for non-executive- directors (Audited) 2020 2020 2020 2019 2019 2019 Society and Travel and other Total fees Society and Travel and other Total fees and Group fees taxable benefts and taxable Group fees taxable benefts taxable benefts (note vi) benefts (note vi) £’000 £’000 £’000 £’000 £’000 £’000 D L Roberts (Chairman) 405 2 407 395 2 397 R Clifton 98 7 105 97 8 105 M Fyfeld 119 4 123 92 9 101 A Hitchcock (note i) 94 7 101 28 5 33 M A Lenson (note ii) 28 1 29 106 4 110 K A H Parry 129 6 135 123 6 129 L M Peacock (Senior Independent Director) (note iii) 96 3 99 142 4 146 U K Prashar 83 5 88 82 11 93 T Tookey 134 3 137 131 6 137 G Waersted 94 7 101 78 10 88 P Rivett (note iv) 63 1 64 - - - Total 1,343 46 1,389 1,274 65 1,339 Pension payments to past non-executive directors (note v) 248 243
Notes: i. A Hitchcock joined the Board on 2 December 2018. ii. M Lenson left the Board on 18 July 2019. iii. L Peacock left the Board on 31 December 2019. iv. P Rivett joined the Board on 1 September 2019. v. The Society stopped granting pension rights to non-executive directors who joined the Board after January 1990. vi. Taxable benefts for non-executive directors relate to expenses incurred in connection with travel and attendance at Board meetings. HMRC deem these expenses to be taxable where the meetings take place at the Society’s main offces and the Society settles the tax on behalf of the non-executive directors. 35 CEO pay ratio reporting
The ratio of the CEO’s total remuneration versus the total remuneration of the median employee of the Society for 2019/20 was 41:1 (77:1 in 2018/19). Further details of the CEO pay ratio calculation are set out in the full ‘Report of the directors on remuneration’.
The year ahead
Remuneration policy implementation pay opportunities in line with the approach for For the CEO, 28% of the maximum award is for 2020/21 all employees, as set out in the overview of assessed based on individual contribution and remuneration policy above. behaviours including in relation to conduct In applying the proposed policy, the Committee matters. For the CFO, from 2020/21 this will be Awards under the DPA will continue to be is guided by the need to ensure executives are 27% of the maximum award. appropriately motivated and rewarded to aligned to measures which are important to our deliver demonstrable value for our members. members. Performance measures for 2020/21 There is no change in the fees for the Chairman are as follows: or non-executive directors for 2020/21. J D Garner voluntarily requested that his base salary be reduced for 2020/21. This will be set • Gateway measures based on proft before Further details of the implementation of our at £783,000 for 2020/21. C S Rhodes will remain tax, leverage ratio and conduct matters policy for 2020/21 are set out in our full ‘Report at an annual salary of £654,000. The pension • Society performance, subject to minimum of the directors on remuneration’. allowance for both directors will reduce to 16% of performance thresholds, assessed against salary from 2020/21 to align with the maximum the following cornerstones: beneft available to the wider employee population. - Building thriving membership Refecting the current challenging environment, – Number of committed members performance pay opportunities across the - Building legendary service Society will be scaled back for 2020/21. Awards – Customer service satisfaction rating for executive directors for the coming year will - Built to last be set at around one-third of normal performance – Total costs Paper from responsible sources When you have finished with this leaflet please recycle it. Nationwide cares about the environment – this literature is printed in the UK with biodegradable vegetable inks on paper from FSC® certifed and other controlled material. We are able to provide this document in Braille, large print or audio format upon request. Your local branch will arrange this for you or you can contact us on 0800 30 20 11. If you have hearing or speech diffculties and are a textphone user, you can call us direct in text on 0800 37 80 01. We also accept calls via BT TypeTalk. Just dial 18001 followed by the full telephone number you wish to ring. Calls may be recorded.
Nationwide Building Society. Head Offce: Nationwide House, Pipers Way, Swindon, Wiltshire SN38 1NW. AGMROY2020 (June 2020)